Investors once turned to gold in times of financial crisis. Now the safe haven may be bitcoin.
Nigel Green, chief executive and founder of London-based deVere Group, points out: “The world’s largest cryptocurrency, bitcoin, jumped 10 per cent as global stocks were rocked by the devaluation of China’s yuan as the trade war with the U.S. intensifies.
[The Chinese renminbi fell to under 7 to the U.S. dollar on Monday – the lowest in more than a decade – igniting drops in stocks and emerging market currencies and driving a rally in government bonds, deVere notes. Bitcoin surged to $11,810 on Monday. It traded as high as $12,500 a month ago and has rallied more than $2,000 in the past week.]
“This is not a coincidence. It reveals that consensus is growing that Bitcoin is becoming a flight-to-safety asset during times of market uncertainty.
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“Bitcoin is currently realising its reputation as a form of digital gold. Up to now, gold has been known as the ultimate safe-haven asset, but Bitcoin – which shares its key characteristics of being a store of value and scarcity – could potentially dethrone gold in the future as the world becomes increasingly digitalized.”
In an analysis published by deVere Group, Green notes: “With the Trump administration now officially labelling China a currency manipulator, escalating the tensions between the world’s two largest currencies economies, investors are set to continue to pile in to decentralized, non-sovereign, secure currencies, such as Bitcoin to protect them from the turmoil taking place in traditional markets.
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“The legitimate risks posed by the continuing trade dispute, China’s currency devaluation and other geopolitical issues, such as Brexit and its far-reaching associated challenges, will lead an increasing number of institutional and retail investors to diversify their portfolios and hedge against those risks by investing in crypto assets.
“This will drive the price of Bitcoin and other cryptocurrencies higher. Under the current circumstances, I believe the Bitcoin price could hit $15,000 within weeks.”
What’s next?
Says Green: “Cryptocurrencies are now almost universally regarded as the future of money – but what has become clear this week is that they are increasingly regarded a safe haven in the present.”
